According to ABI Research’s Vamsi Sistla, several factors drive this exciting change.

Film studios and record labels are losing their fear of digital distribution, partly due to the commercial success of music download services such as Apple’s iTunes.

The telcos have realized that there are great opportunities for additional revenue if they offer their customers video over copper wire and fiber in future. This depends on broadband penetration: at the end of 2003, there were over 85 million broadband subscribers worldwide, of whom 53 million were DSL subscribers, ideal candidates for video on demand over broadband.

These consumers are seeing a proliferation of digital devices in stores: PCTV cards, media adapters, IP STBs and media centers. NetFlix has already taken a small bite out of Blockbuster’s revenue; now watch out for broadband video, which is right around the corner that could pose a bigger threat to the prevailing video distribution landscape.

This won’t happen everywhere at once. Regions with successful cable and satellite TV industries will take longer. But in markets with lower cable/satellite penetration, it’s happening now: a number of countries have already rolled out DSL TV services.

Sistla, concludes, “Obviously there initial shortcomings compared to cable or DBS. They won’t be able to offer high definition quality content, for example: the data rate isn’t high enough, and the compression isn’t at that level. But in future, xDSL and Fiber or some combination of both could be a very viable candidate to offer an HD stream just like cable or satellite.”